Will functional separation of telecom operations in the EU take place?

BRUSSELS, May 6 (Reuters) - A European Commission proposal
to boost competition by forcing telecom companies to run their
networks and commercial arms separately should be scrapped, a
top European Union lawmaker said on Tuesday.

EU Telecoms Commissioner Viviane Reding has proposed
"functional separation" when all other means of increasing
competition have failed, but some EU states such as Germany
remain uneasy.

"I feel we do not need functional separation," said Angelika
Niebler, the German centre-right lawmaker who chairs the
European Parliament's industry committee.

The assembly and EU governments have joint say on Reding's
proposal, part of a package to update the bloc's telecom rules.

Niebler said she would submit amendments to delete
functional separation from Reding's draft package.

Functional separation has already been introduced in
Britain, where former state-owned monopoly BT (BT.L: Quote, Profile, Research) runs its
network and services as separate units.

British telecoms regulator Ofcom has described this argument
as a myth, saying BT was investing 10 billion pounds ($19.6
billion) in new networks.

Catherine Trautmann, a French socialist steering the measure
through parliament, said functional separation should remain an
option for national regulators to use as a last resort but only
after thorough analysis.

"I agree it should be optional. It will be applied in some
countries. In some countries perhaps it should be applied,"
Trautmann said.

Any application should be justified to ensure it promoted
investment and any disputes resolved within two months to avoid
legal uncertainties, Trautmann added.

Several members from across the political divide backed this
approach, and only Niebler spoke in favour of scrapping the
proposal.

"We should introduce it but only when absolutely necessary.
We need very clear criteria when this is needed," said Romana
Jordan Cizelj, a Slovenian centre-right lawmaker.

Herbert Reul, a centre-right lawmaker from Germany, said
Reding's proposal may need adjusting to ensure more legal
certainty for companies and make investments more secure.

"We have said we need clear criteria when it comes to
functional unbundling," added Silvia Adriana Ticau, a Romanian
socialist.